2 Decision Phases of a Supply Chain Supply chain strategy or designAutomate flow of information between company and supply chain partnersSupply chain planningGenerate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that productSupply chain operationManage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner
3 Supply Chain PlanningDefinition of a set of policies that govern short-term operationsFixed by the supply configuration from previous phaseStarts with a forecast of demand in the coming year
4 Supply Chain Planning Planning decisions: Which markets will be supplied from which locationsPlanned buildup of inventoriesSubcontracting, backup locationsInventory policiesTiming and size of market promotionsMust consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon
5 Capacity Management in a Supply Chain Managing capacityTime flexibility from workforceUse of seasonal workforceUse of subcontractingUse of dual facilities – dedicated and flexibleDesigning product flexibility into production processes
6 The Capacity Management Problem Given the demand forecast for each period in the planning horizon, determine the production level, inventory level, and the capacity level for each period that maximizes the firm’s (supply chain’s) profit over the planning horizonSpecify the planning horizon (typically 3-18 months)Specify the duration of each periodSpecify key information required to develop capacity management plan
7 Capacity Management Strategies Trade-off between capacity, inventory, backlog/lost salesChase strategy – using capacity as the leverTime flexibility from workforce or capacity strategy – using utilization as the leverLevel strategy – using inventory as the leverMixed strategy – a combination of one or more of the first three strategies
8 Chase StrategyProduction rate is synchronized with demand by varying machine capacity or hiring and laying off workers as the demand rate variesHowever, in practice, it is often difficult to vary capacity and workforce on short noticeExpensive if cost of varying capacity is highNegative effect on workforce moraleResults in low levels of inventoryShould be used when inventory holding costs are high and costs of changing capacity are low
9 Time Flexibility Strategy Can be used if there is excess machine capacityWorkforce is kept stable, but the number of hours worked is varied over time to synchronize production and demandCan use overtime or a flexible work scheduleRequires flexible workforce, but avoids morale problems of the chase strategyLow levels of inventory, lower utilizationShould be used when inventory holding costs are high and capacity is relatively inexpensive
10 Level StrategyMaintain stable machine capacity and workforce levels with a constant output rateShortages and surpluses result in fluctuations in inventory levels over timeInventories that are built up in anticipation of future demand or backlogs are carried over from high to low demand periodsBetter for worker moraleLarge inventories and backlogs may accumulateShould be used when inventory holding and backlog costs are relatively low
11 Decision Phases of a Supply Chain Supply chain strategy or designAutomate flow of information between company and supply chain partnersSupply chain planningGenerate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that productSupply chain operationManage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner
12 Supply Chain Operation Time horizon is weekly or dailyDecisions regarding individual customer ordersSupply chain configuration is fixed and operating policies are determinedGoal is to implement the operating policies as effectively as possibleAllocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment ordersMuch less uncertainty (short time horizon)
13 Drivers of Supply Chain Performance Facilitiesplaces where inventory is stored, assembled, or fabricatedproduction sites and storage sitesInventoryraw materials, WIP, finished goods within a supply chaininventory policiesTransportationcombinations of transportation modes and routes
14 Drivers of Supply Chain Performance Informationdata and analysis regarding inventory, transportation, facilities throughout the supply chainpotentially the biggest driver of supply chain performanceSourcingfunctions a firm performs and functions that are outsourcedPricingPrice associated with goods and services provided by a firm to the supply chain
15 Supply Chain Performance Measurement Metrics for measuring supply chain performance:Fill rate (the ability to fill orders by the due date)Average time from order to deliveryThe number of days of supply in inventoryForecast accuracyThe cycle time for sourcing and making a product
16 Case Study :Toyota’s Demand Planning With more than 1,200 accessory part numbers Toyota was experiencing greater business complexity and increased business volume regarding new models and partsThe spreadsheet-based system Toyota used to manage its supply chain processes was less than optimal. Toyota’s accessory supply administrators had to go into the spreadsheets to manually enter and extract critical vehicle information.
17 Toyota’s Challenges To automate the forecasting process To allow more time to examine demand driversTo remove inefficiencies from the supply chain
18 Toyota’s Supply Chain Solution Replace existing spreadsheet-based systemEnable administrators to investigate issues during ordering processAnalyze part numbers more effectively
19 How did i2 Technology help? Toyota chose i2 Demand Planner™ as the solution to forecast future demand for its automotive parts and accessories.Demand Planner provides an environment that combines the best statistical techniques, unlimited causal factors, and the ability to manage multiple inputs with best-in-class, multi-dimensional data representation and analysis in a user-friendly manner.
20 The Outcome increased forecasters’ efficiency Improved communication among supply chain divisionsReduced inventory shortages and overages resulting from poor forecasting
21 Discuss the following questions: What problems do Toyota address? How does i2 Technology supply chain solution help solve these problems?What issues and challenges do Toyota present? What can be done to address these issues?What are the business as well as the technology issues that should be addressed when i2 Technology provide Toyota demand planning solution?